Calderbank Offers.
Litigation is the last resort for resolving a dispute and generally by the time the matter proceeds to trial all other avenues may have been exhausted with the process being costly both financially and emotionally. If you have ever been involved or are currently involved in a legal dispute you may have seen an offer to settle in accordance with the principles of Calderbank.
What does that mean?
In short, it is a method used to try and resolve the dispute by encouraging reasonable negotiations between the parties while attempting to protect a party’s position on costs.
The key features of a Calderbank offer are:
- be marked with “without prejudice as to save with costs”
- state that the offer is made in accordance with the principles in Calderbank v Calderbank
- be clear, precise, and certain in its terms and must be capable of acceptance
- clearly state the time in which the offer is to be accepted- which must be reasonable
- outline reasons why the offer should be accepted; and
- outline clearly what happens if the offer is not accepted, such as being relied upon for an application for indemnity costs.
Calderbank v Calderbank
The principle of a Calderbank offer stems from the English case of Calderbank v Calderbank [1975] 3 AII ER 333. The facts of the case were that the parties had been granted a divorce after 17 years of marriage and were having issue with the division of their assets which equated to an approximate amount of £78,000. The court awarded Mr Calderbank £10,000 plus legal costs, however, prior to proceedings Mrs Calderbank offered her ex-husband the matrimonial home which had an estimate value of £12,000 which was rejected.
Mrs Calderbank appealed the decision on the basis that the offer was reasonable and the rejection by Mr Calderbank prior to the trial unnecessarily prolonged proceedings and therefore, should not entitle him to legal costs.
It was held that Mr Calderbank had unnecessarily delayed legal proceedings by refusing to accept the offer of £12,000.
How does it work?
Calderbank offers must be made prior to the delivery of judgement and can be provided before or during litigation. When determining costs some factors the court may consider are:
- timing of the offer
- timing allowed for acceptance
- was the offer a genuine offer to settle
- the clarity of the terms.
Generally, the unsuccessful party is liable for costs, however, the court may award costs on an indemnity basis if there is reason to do so- such as not accepting a reasonable offer to settle prior to a hearing.
Consequences of not carefully considering the offer
In Barboza v Blundy [2021] QSC 82 – Caselaw the defendant made a valid Calderbank offer to the plaintiff nine months away from trial with a date of acceptance of 14 days. The offer contended that the parties be liable for their own costs and that the plaintiff agree to release the defendant from any claims related to the subject matter of the proceedings, outlining reasons why it would be unreasonable to not accept the offer. At this juncture the defendant had incurred estimated costs of approximately $350,000. Subsequently, the offer lapsed and was not accepted.
Five (5) weeks from trial the defendants provided another Calderbank offer which was open for acceptance for 14 days. Again, the offer was to settle on the basis that the plaintiff discontinues proceedings, and parties be liable for their own costs and indicated intentions to seek special costs in the event the defendants are successful at trial. At this juncture, the defendant had incurred legal fees estimated to be more than $1,000,000.
The defendant made a third offer to settle on the first day trial, which was made on an open basis by email and not in accordance with Calderbank. Again, the plaintiff rejected that offer.
The court held that the first offer demonstrated a good case to bring proceedings to a conclusion and the rejection of the offer was unreasonable. The rejection of the second and third offers demonstrated an unreasonable attitude from the plaintiff and therefore, in all the circumstances the court ordered that the plaintiff pay the defendant’s costs on a standard and indemnity basis.
Barboza serves as a timely reminder of what costs can be imposed in circumstances of rejecting a reasonable offer.
Not all offers are capable of being Calderbank offers and careful consideration on timing and context is required. However, if the timing and context is right, providing a Calderbank offer is a useful mechanism when deployed correctly, to encourage a party to settle and avoid the cost associated with trial.
The above is general information only, and it is important that tailored legal advice is sought in specific circumstances. If you require advice or assistance, please contact our experienced team at Miller Sockhill Lawyers on 07 5444 4750.